April 24, 2014

"Five million people lost their coverage around the country."That quote comes from John Barrasso, chairman of the Senate Republican Party Committee. But if you’ve heard Republicans and their allies make the case against Obamacare, then you’ve inevitably heard some version of this. In some tellings, the number is 6 million. In others, it’s just “millions.” But it’s always a reference to the same thing: People who buy coverage on their own, rather than through employers, and who learned last year that carriers were cancelling existing plans because those policies didn’t live up to Obmacare’s coverage standards.

Sometimes conservatives cite this figure as proof that, on net, the number of Americans with insurance will decline because of the Affordable Care Act. That’s almost certainly not true, as a recent series of surveys have shown. But sometimes these critics settle for a less audacious claim—that most of the people who got cancellation notices are worse off because of the law. That argument has also been highly suspect, for reasons a new study makes clear.

The study, which appears online at the journal Health Affairs, is by Benjamin Sommers, an assistant professor at the Harvard School of Public Health. Using data from the Census Brueau's Survey of Income Program and Participation, or SIPP, Sommers found that, historically, the non-group insurance has tended to have lots of churn.

In English, that means few people hold onto non-group policies for very long—typically, it’s just a transitional phase, while they are between jobs that provide insurance directly. In the sample that Sommers examined, the number of people who still had the same policy after just four months was already less than than two-thirds; after one year, it was down to 42 percent; after two years, it was down to 27 percent. Generally people who lost their non-group policies simply picked up coverage through new employers, though some ended up with public insurance, different non-group policies, or without any insurance at all. The turnover was highest among younger people and members of minority groups.

So what does that tell us about Obamacare? According to Sommers, it suggests that most of the people who got those cancellation notices probably would have dropped existing coverage within a short time anyway:

reports that recent cancellations of coverage may affect as many as 4.7 million adults (though precise estimates are lacking) are likely capturing a great deal of the normal turnover in this market. The findings presented here also suggest that overall coverage rates in the United States are unlikely to fall as a result of these cancellations: Most people who left nongroup coverage in this study acquired other insurance within twelve months, even before the ACA offered increased coverage via the Medicaid expansion and tax credits for Marketplace insurance.

Of course, some people really did lose coverage that they liked. They have a totally legitimate gripe with Obama, who repeatedly promised that people could keep those plans. And in many cases these people are now paying higher premiums for coverage, because insurers had to provide more benefits and stop charging different prices to the healthy and sick. Again, that's a clear result of Obamacare.

Still, Sommers says that 65 percent of the people in his study had incomes below 400 percent of the poverty line, which means they’d be eligible for tax credits that make non-group insurance less expensive than the sticker price. That makes him skeptical about the extent of “rate shock”:

Some adults in this age range with nongroup coverage will experience premium increases due to the ACA. However, most of them will qualify for lower premiums due to tax credits, and many of them will experience even larger declines in total out-of-pocket spending because of reduced cost-sharing requirements. Thus, true “sticker shock” is the exception rather than the rule for younger adults in this rapidly changing market.

Sommers is a part-time adviser to the Department of Health and Human Services. And I’m in no position, at least right now, to render a judgment on the intellectual quality of his work. But his study echoes earlier analysis from experts at the Kaiser Family Foundation and from the Urban Institute, each of which noted the same basic facts: The non-group market is extremely unstable, which means few people keep the same policies for long, and the availability of large tax credits for buying insurance should offset premium increases for many and possibly most people who already had coverage. A report by the minority staff of the House Energy and Commerce Committee, led by ranking Democrat Henry Waxman, came to similar conclusions.

As with every aspect of the Obamacare debate, it’s difficult to be certain, let alone precise, about the law's financial impact on individuals and the population as a whole. It will take months and probably years to sort out the data, and even then there will some difficult, contentious debates over what people really want and need. But this latest study confirms what previous studies have shown: Lots of people who lost old policies are no worse off for the change. That makes a big difference, particularly when it seems so many more people are benefitting.